TUTORIAL ONE: CHOICE OF BUSINESS ORGANISATION Questions Consider the different type of business organisation available. Which factors are relevant to the choice of form to be adopted?
Do you agree with the Finch and Freedman critique of the limited liability partnership structure? Identify the other recent reform proposals for Partnership Law (see Company Lawyer editorial).
Black and White have developed a product which will increase efficiency in the machine tooling industry. They have recently been made redundant and wish to set up in a business together. They have some capital, in the form of their redundancy payments, but will need more to establish the business. They seek your advice about the best form of organisation to adopt for their new business.
(a) How would you advise them? What factors would you take into account in forming your opinion?
(b) Pink has a large sum of money available which would be of considerable assistance to Black and White. Pink is willing to invest this sum in their business, but is not interested in having any active management role. How might Pink's position be catered for?
(c) Assume that the business (having adopted the form of organisation which you recommended) has been very successful, and that Black and White have now developed new products for which there is likely to be great demand. They wish to expand the business to cater for the demand. The expansion will require large sums of capital investment, and an increased workforce. They again seek your advice as to whether there should be any changes to their form of organisation, and how the form they might use might assist them in meeting the demands of the proposed expansion. Advise them.
Reading Companies Act 2006, ss 3-7 & 16 (statute book).